Automatic Reinstatement

What Does Automatic Reinstatement Mean?

Automatic reinstatement is an insurance policy provision that ensures the policy limit is restored after a claim is paid out. In other words, it reinstates the original coverage limit following the payment for a covered loss.

This provision may also be referred to as the maximum aggregate limit of indemnity.

Insuranceopedia Explains Automatic Reinstatement

For example, under a $100,000 homeowners insurance policy, if the insured experiences a covered loss of $40,000, the insurer will pay out the $40,000 claim. After this payment, the original policy limit of $100,000 is reinstated. This means the insured would still be covered for up to $100,000 for a new, unrelated claim, rather than only $60,000 for the remainder of the policy period.

A policy may allow for one or more reinstatements of the policy limit, but this is not a guaranteed feature. Therefore, it is important for a policyholder to thoroughly understand the full terms of their policy.